Transaction Analysis Blog

The Brewers Extend Ryan Braun

Despite already having Braun under contract through the 2015 season, the Brewers have ensured he will not be testing the free agent markets anytime this decade by signing their star left fielder to an extension through the 2020 season. The deal is worth $105 million according to Ken Rosenthal, and is the third extension handed out by Milwaukee over the last seven months (along with Corey Hart and Rickie Weeks)

The Brewers have spent between $80 and $90 million on player salaries over the last three seasons, so giving any player a deal that calls for an annual average value exceeding $20 million is jarring. In reality, the contract is broken down in a way so that Braun will not bring home $20 million each season. Instead, as Buster Olney tweets, Braun will receive a $10 million signing bonus with some of the remaining salary deferred and an additional $4 million placed aside as a buyout on a mutual option for the 2021 season.

There is a lot to digest with Braun’s extension. The time value of money comes into play, as $105 million from 2016-to-2020 is different than $105 million from 2010-to-2015. Even then, the Brewers are assuming a huge risk by giving Braun this contract nearly five seasons before his current one expires. It is unclear what the Brewers gain here—besides the entirety of the risk—as Braun does not appear to be taking a discount in exchange for security.

The points in favor of extending Braun are that Doug Melvin and the front office know his conditioning habits and medical records better than any outsider could and that they have a better grasp on the Brewers revenue stream and potential for growth. Still, giving any player an extension of this magnitude is questionable.

And the real question to answer is why now. Whether Braun appears worth the contract in 2011 or not is almost irrelevant. Braun is a good player—a real good player, even—but a high talent level in 2011 does not ensure or remotely guarantee a high talent level in 2016 or 2018. Signing any player—really, just about any player—to a contract until he is 37-years-old is a gamble, and doing so when the player signs it at age 27 only magnifies the probability of doom.

One has to admire the Brewers moxie and commitment to keeping their star players in town, but at the same time, one has to wonder if this—like the Troy Tulowitzki extension—will appear overzealous before the new deal even kicks in.

I imagine part of the value of it, from Melvin's perspective, is that it functions as a signaling mechanism toward free agents to be, primarily those in-house, and excluding Fielder. Down the road, Greinke, Gallardo, Marcum, and whomever the Brewers might get for Fielder may feel that they can get paid, play for a winner, and still stay in Milwaukee.

It also signals to the fans that they are trying to build something sustainable, and that in order to do that, they will need to keep drawing 3 mil or so per year. That is, the plan isn't to try to contend for a couple years every once in a while when a bunch of guys develop at the same time, but to become, long-term, a sustainable mid-market club like St. Louis.

I don't know that it's an entirely reality-based strategy, and it seems unnecessary to go so far right now, but I think Braun is about as safe a guy to do this with as anyone.

This will probably turn out badly in the end, but as a fan I'm glad they are willing to spend, which is a stark contrast to the team when Bud was running it. Unfortunately, this type of contract will not be enough to secure Fielder in the offseason.

"Braun does not appear to be taking a discount in exchange for security"

As you alluded to ("$105 million from 2016-to-2020 is different than $105 million from 2010-to-2015"), I can only imagine the best players from 2016-2020 will be making WAY more than $21 million per season. I would say that means Braun DID, in fact, take somewhat of a discount.

You're assuming Braun will be one of these "best players" from 2016-2020, or at least close to it. I wouldn't want to bet on *anyone* being one of the best 25 players in baseball in 2016, let along 2020 right now -- let alone Braun.

I don't think he's making that assumption, or at least it's not necessary to his point. Assuming ~5% salary inflation, I get that each WARP will be worth about $6.7 million. In that case Braun would only have to be a ~3 win player for the deal to be 'worth it.' If inflation is ~10%, aggressive but not impossible, he'd only have to be average (~2 WARP) to be a positive value to the team.

Now I think betting on anyone to be even average in 2016 is nuts, especially for a team with serious financial constraints, but I can see the logic. Melvin's essentially betting that 1)salary inflation continues/accelerates, and 2)Braun will be at least average to slightly above from 2016-2020. There's a real chance, perhaps not a great one but a real one, that both those things will come to pass.

There is also intangible value to keeping Braun happy, showing fans and prospective signees that the team is willing to spend, and setting the precedent for signing their next great young player to a jillion-year below-market deal. Phase 2: draft/sign great young players...

It's too easy to say "they should have waited 3 years before giving Braun this deal." Who know what kind of deal Braun would have needed to sign in three years. Is an 8 year $220 million contract ending when Braun is 39 better than this one if it is signed in 2014 just because we would have more information?

Oh, and perhaps if BP would update its 10-year forecasts, we could see if PECOTA says Braun will be one of those "best players" from 2016-2020...

I agree there are risks to waiting on a deal. If $$/WARP goes up a bunch in the next few years, that costs the Brewers more money. Or if Braun has a few (more) huge years, his 2016-2020 price tag will go up. I'm not necessarily against this deal, nor do I think "they could have waited so they should have waited" is a good argument. The Brewers are betting on a combination of two things here: Braun ages well and/or the salaries of free agents are going to rise considerably. I think the second is a better bet, although I don't love locking in an expected 1-2 win guy eight years from now even if it's market rate.

Braun is clearly a top-tier bat, at least equivalent to a Jason Werth who's making roughly the same, though in an earlier time frame.

The problem for me here is that, as the author stated, there is no reason to do this. A five year deal is already in place but a lot of things can happen in those five years. Injuries, decreased performance, inability to play the OF, financial problems, a rebuilding process, all really suggest shorter deals are always a better goal. Granted most of the best players in the league aren't settling for a small deal, so to acquire big players you have to go several years - Still you have him signed already for five years and I just cannot fathom why they'd want to extend him another five years without having any idea what is going to happen until then. If he took a serious discount that'd be fine but most analysis here is that he took a very modest discount - hardly worth the risk.

Lots of downside, very little upside here. Probably going to turn out a little on the sour side.

1. Revenue growth appears to be decelerating. (Brewers already cashed in the new ballpark chip, the cable TV money train is already running at full steam and attendance is trending down.) This is taking a big gamble that salaries will continue to increase at or nearly at the recent rate.

2. Best case scenario/worst case scenario ratio is stacked against the team. At best, the team has locked up a good player at a slight discount. At worst, they hung a huge albatross on the franchise.

3. Why now? They couldn't wait to see what happens in the next labor agreement before signing this deal? That's another risk. Why not wait until Fielder leaves then use this extension as a public relations move?